Josh Kopelman

Managing Director of First Round Capital.

espite being coastally challenged (currently living in Philadelphia), Josh has been an active entrepreneur and investor in the Internet industry since its commercialization. In 1992, while he was a student at the Wharton School of the University of Pennsylvania, Josh co-founded Infonautics Corporation – an Internet information company. In 1996, Infonautics went public on the NASDAQ stock exchange.

Monthly Archives for 2010

No Surprises...

You missed your sales forecast. Your CTO quit. You lost a big sales prospect. You
didn't get the term sheet you were expecting. Your web site has been down for hours.

What do you do?

All entrepreneurs know that running a startup company has its ups
and downs. However, how a CEO handles the downs is very important. If there's one thing I've learned, its that a
CEO needs to share the bad news with investors just as fast as they share the
good news.

I'm a big believer in creating transparency between a
CEO and his board of directors. At
Half.com, we created an automated email to summarize our daily sales numbers. In addition to sending it internally to
management, we also sent it our board members. No one expected them to track our sales on a
daily basis (that was my job), but by providing them with the constant flow of
information, they were able to make better suggestions/recommendations when
asked. (That's the same reason why
Jingle Networks distributes a daily email summarizing call volume to
1-800-FREE411).

With the growth of ASP-based management tools, there are
now even easier ways to share information with investors. Several of my portfolio companies have
created accounts on Salesforce.com for Board Members with a customized BOD dashboard to provide a "30,000 foot view" of the pipeline. Other companies have created accounts on
Google Analytics so that board members can access traffic stats in real time.

By providing open access to information sources there are a number of benefits:

It eliminates
surprises. By providing a continual
stream of information, the board should never be surprised.

It makes board
meetings much more productive. Rather
than spend a lot of time presenting the raw data, the CEO can now provide
interpretation and analysis of data -- they can put the numbers in context.

It allows board
members to make more meaningful suggestions. Different board members have different
skills. Some are strong at enterprise
sales -- and by tracking a sales pipeline over time they might be able to
identify areas for improvement in the sales cycle. I personally am stronger at online consumer
marketing -- and feel that by having access to website traffic reporting I can
ask better questions and make better recommendations.

Sharing data with a board does
not mean that you are sharing control. Rather,
I believe that an informed and knowledgeable board will be less intrusive (and more hands-off) than
a board that is in the dark. (That said,
a CEO should clearly set expectations that they are not looking to get the
"why are Tuesday's sales 2% lower than Monday's sales" phone call. )

Too many CEO's try to hide
their bad news and setbacks -- they stick it in the fifth paragraph of a six
paragraph email. I get extremely
uncomfortable with that approach. It
forces the investor into the role of detective -- constantly on the look out for hidden
clues.

Just last week I received an
email from a portfolio company CEO with the subject line "Bad news. XXXX is reversing his previous agreement to
fund us." While no investor likes
to receive bad news, I must say that I was impressed by the way the CEO handled
it. He communicated the news
clearly and boldly.